Thursday, April 17, 2008

In the last post I asked whether VCs invest in startups based on the pedigree of the founders. That is not the right question. Definitely pedigree reads like a pejorative term. Professor Rashi Glazer of UC Berkeley says,

VCs do not invest in the current idea you have, they know the statistic that 80% of the funded startups ended up doing something different than what they were funded for. They invest in the business process and thought process the founders demonstrated and they know that the right thinking process will allow the founders to adapt when the situation changes.

In a way it is people the VCs invest in, because the thinking process cannot be separated from the people but it is not tied to just one set of people. Your past victory gives you the benefit of doubt.